AI Could Affect Your Social Security Benefit - and Not in a Good Way

Social Security and Medicare face solvency concerns as trust funds approach depletion. An aging population and low birth rates reduce the number of workers paying payroll taxes while increasing the number of beneficiaries. A new risk comes from AI potentially causing job loss and lowering earnings. Social Security and Medicare are funded through payroll taxes under FICA rules. Workers and employers split a 12.4% Social Security tax, capped by a wage base limit, and pay a 2.9% Medicare tax with an additional 0.9% for high earners. Both programs operate on a pay-as-you-go basis, so current workers’ taxes fund current retirees’ benefits. Reduced employment and taxable wages can therefore weaken funding and accelerate shortfalls.

"After potential job loss and the inability to afford food and housing, a secondary risk is the solvency of Social Security and Medicare."

"Workers and their employers split a 12.4% tax for Social Security, with each paying 6.2% of the employee's salary per year. FICA taxes are capped by a "wage base limit" of $184,500, but most people pay this tax on all or at least the majority of their income."

"Both Social Security and Medicare operate on a pay-as-you-go basis. Essentially, this means that when you pay into the program, your money isn't put in a vault somewhere for you. Instead, the taxes paid by current workers fund the benefits that are being paid to today's retirees."

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